Open interest: the money in play and what its change says about the trend

Open interest (OI) is the aggregate size of unclosed futures positions. Unlike volume (how much was traded), OI shows how much money remains in play. Its dynamics together with price form a table of four regimes.

The four combinations

• Price up + OI up: new money enters the rally - the trend is confirmed and fueled.
• Price up + OI down: a rally on short closing (a short squeeze) - the fuel is finite, the move fades with the last short.
• Price down + OI up: new shorts press the market - a bear trend with feed.
• Price down + OI down: longs give up and leave - capitulation; paradoxically, often the late phase of the decline.

Reading nuances

A sharp OI collapse within minutes is a liquidation cascade: the market has been "flushed" of leverage, and the move often reverses. Better to count OI in coins, not dollars: dollar OI grows with price by itself. And look across exchanges in aggregate - position migration between venues distorts any single one's picture.

OI and funding together answer the derivatives market's main question: who is in the crowd and whose money drives the move. The summary lives in the section.